Is DB Cargo able to handle the impact of strikes?

DB Cargo UK loco side panel (DB Cargo UK)

ANALYSIS – One can only guess after the damages suffered by DB Cargo after three rounds of strikes among train drivers in the last five weeks. But one thing is certain: there will be damages suffered. For the heavily loss-making rail freight division of Deutsche Bahn (DB), this is yet another setback after six years of mounting losses. In addition, the reputational damage for DB Cargo is considerable. 

DB Cargo is active in seventeen European countries and is therefore still the number one on the European rail freight market. However, in Germany, the former monopolist has lost a lot of ground in recent years. For example, according to the latest transport statistics, the company is only responsible for about 44 per cent of rail freight transport in the country.

This damage was already there

What does not help: the market share of rail freight on the German transport market fell from 19 per cent to 17.5 per cent during the corona crisis last year, while road transport cautiously won market share. The strikes of the last five weeks at DB Cargo will certainly not reverse this negative trend for rail transport.

Even more worrying are the financial results of Deutsche Bahn’s freight subsidiary. They have been red since 2015. Last year the negative result doubled to 728 million euros, while about 200 million in losses had to be added over the first six months of this year.

In total, the transport activities of DB Cargo have saddled the German parent company with a loss of around 2 billion euros over the past six years. Strikes are therefore the last thing the ailing rail freight operator, which had hoped for a volume growth of 10 per cent this year, is waiting for.

Rescue plan

Analysts also wonder what will remain of the rescue plan of DB Cargo’s new boss, Sigrid Nikutta, who took office last year. It focused on better and more reliable services, combined with a greater role as a logistics director, i.e. forwarding, whereby road transport was also offered in addition to individual wagons. DB Cargo saw growth opportunities in this segment in the past year, because many shippers were able to reduce their CO2 emissions with this combined customisation.

The increased traffic jams on the German motorways were also a reason to opt for alternative transport by DB Cargo. However, with the recent actions in mind, shippers will now think twice before entrusting their cargo to a company whose employees are at war with management and where cargo is not booked at all at the time of strikes.

Large customers have mixed feelings

The German rail freight operator is still an important market player in container transport to and from the major seaports (Hamburg, Rotterdam and Antwerp) and the transport of bulk goods such as coal, steel, building materials and chemicals. In addition to steel furnaces and power plants, the German car industry, led by BMW and Audi, is also an important customer of DB Cargo. Incidentally, in view of the closing of the last coal-fired power stations in Germany, coal transport is also on the decline for DB Cargo.

The recent actions are also viewed with mixed feelings among such large customers, although the consequences of the first, short, strikes of 11 and 12 August (48 hours) were still manageable. The backlogs, about three hundred freight trains, were put back on rails relatively quickly, according to DB Cargo. In tota,l there have now been eleven days of strike, which the Institut der Deutschen Wirtschaft has calculated have cost the German economy around 100 million euros per day. The total damage of the actions will soon exceed 1 billion euros.

German chemical giants such as BASF, Covestro and Lanxess have been looking for alternative transport options after the first round of strikes by the drivers. However, these are limited by the already limited freight space in road transport and inland shipping, while DB Cargo’s competitors on the rail are already largely fully booked.

Author: John Versleijen

1 comment op “Is DB Cargo able to handle the impact of strikes?”

Sam Green|11.09.21|13:59

The damages will be – big companies fed up with the constant halt in the supply of raw materials and finished products , will switch to road transport and Train drivers will lose their jobs! Plus their union will take a drop in revenue and become less powerful !! Why don’t these people wake up and smell the coffee!!?

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